Sunday, January 27, 2013

Breaking News: San Francisco Legalizing Airbnb

(This story is written on Jan. 18th 2013.)

San Francisco District 3 supervisor David Chiu will introduce a new legislation by the end of January that legalizes renting residential space for fewer than 30 days. “The new legislation allows tenants and condo owners to rent their rooms to travelers in San Francisco. In this way they can make some extra money”, said Amy Chan, Legislative Aide from Office of Supervisor David Chiu.

With the growth of technology companies that advocate sharing economy, San Franciscans are taking advantages of this opportunity to earn some money by renting out their spare rooms on websites like Airbnb. Airbnb connects tourists who want to have a local experience at a good price to the hosts who want to rent out their spare rooms.

By charging a fee on the transaction, Airbnb is likely to generate 1 billion a year in revenues if the recent Forbes projection of Airbnb booking--100 million nights per year--comes true. The not that great news is Airbnb is operating in a huge legal grey area because San Francisco has a ban on renting residential space for fewer than 30 days. This ban intend to protect long term tenants from being crowded out by short stay tourists.

The new legislation tackles this problem by only offering the legalization to the hosts who live in the spaces for majority of the year. Moreover, “there would be a cap on the number of days hosts can rent out their rooms”, said Amy Chan. Students who go back home for summer and winter breaks would benefit greatly from this legislation so do people who want their vocations partially financed by their vacant homes.

However, many Airbnb hosts have no idea about whether their income generated through Airbnb subjects to hotel tax or not. Airbnb promised them instruction before tax season even though City Treasurer Jose Cisneros ruled last year Airbnb and the kind are responsible for hotel tax. “The new legislation would not touch hotel tax”, said Amy Chan, “this is settled by the City Treasurer and David agrees”.

Airbnb spokesperson Kim Rubey declined to comment on the new legislation before it is officially introduced. She added that there are ongoing dialogues between Airbnb and city officials on the issue of hotel tax.

Besides the city ban, most contracts of lease contain a sub-clause that prohibits subletting. “If there is no subletting clause and David Chiu’s legislation passes, landlords would not make an extra dime,” said San Francisco Apartment Association Government and Community Affair Coordinator Charlie Goss, explaining that San Francisco enforces strict rent control, “but the tenants would collect rents far more exceeding what their landlords could collect.”

“Renting out a spare room on Airbnb is not the same as operating a hotel”, said Hotel Council of San Francisco Executive Director Kevin Carroll, “but Airbnb is competing with us. If it is operating like a hotel, it should provide same protection for its guests and pay taxes.”

David Chiu’s new legislation is likely to put some order in the grey area where Airbnb operates. “Some landlords have evicted their tenants to make more money through Airbnb,” said Housing Rights Committee of San Francisco Director of Counselling Program Tommi Avicolli Mecca. He said, “The vacancy rate in San Francisco is already very low. Airbnb hotels are not a good way to utilize precious housing resource in the city”. (Update 9/19/2013: The legislation has not occurred yet since I wrote this story. I need to explain more about the circumstances. I worked as an intern reporter for a local newspaper last winter in San Francisco. I interviewed all the people involved in this story. Every source quoted here is authentic. The legalization seemed to be happening at that time. However, my story was not published for some reason and I just published it here. During the summer, I heard that David Chiu was still dealing with the Tenants Association and the Apartment Association. It's a really tricky piece of legislation.)